Zollverein
The Zollverein, or German Customs Union, was a coalition of German states formed to manage tariffs and economic policies within their territories. Organized by the 1833 Zollverein treaties, it formally started on 1 January 1834. However, its foundations had been in development from 1818 with the creation of a variety of custom unions among the German states. By 1866, the Zollverein included most of the German states. The Zollverein was not part of the German Confederation.
The foundation of the Zollverein was the first instance in history in which independent states consummated a full economic union without the simultaneous creation of a political federation or union.
Prussia was the primary driver behind the creation of the customs union. Austria was excluded from the Zollverein because of its highly protectionist trade policy, its unwillingness to split its customs territory into the separate Austrian, Hungarian and Galician-Lodomerian ones, as well as Prince von Metternich's opposition to the idea. By the time of the North German Confederation's founding in 1867, the Zollverein included states whose area totaled approximately, and it had produced economic agreements with several non-German states, including Sweden–Norway. After the founding of the German Empire in 1871, the Empire assumed the control of the customs union. However, not all states within the Empire were part of the Zollverein until 1888. Conversely, though Luxembourg was a state independent of the German Empire, it remained in the Zollverein until 1919.
Background
The splintering of territory and states over generations meant that by the 1790s in the German-speaking Holy Roman Empire in Central Europe, there were approximately 1800 customs barriers. Even within the Prussian state itself, there were, at the beginning of the 19th century, more than 67 local customs and tariffs, with as many customs borders. To travel from Königsberg in East Prussia to Cologne, for example, a shipment was inspected and taxed about 80 times. Each customs inspection at each border slowed the shipment's progress from source to destination, and each assessment on the shipment reduced profit and increased the price of goods, dramatically stifling trade.When France defeated the Second Coalition, made up of Russian, Austrian and German forces, and annexed territories up to the Rhine, there was a general consolidation of the myriad of tiny states in Germany in the Mediatization of 1803. This was also called the Principal Conclusion of the Extraordinary Imperial Delegation. This last piece of major legislation enacted by the Holy Roman Empire re-arranged the map of Central Europe, especially in the southwestern territories. The Reichshauptschluss resulted in the secularization of many ecclesiastical territories, and the so-called mediatization, i.e. the annexation to larger neighboring territories, of many of the formerly free imperial territories, including most of the imperial cities. Considerable portions of the Habsburg family territories in southwestern Central Europe were "mediatized", or given as compensation, to the princes and dukes who had lost territories in the French expansion. Most of the imperial cities, imperial abbeys, and ecclesiastical states and cities were mediatized or secularized in 1803. With the final dissolution of the Holy Roman Empire in 1806, most of the remaining tiny principalities were annexed by larger neighbors.
Historians have analyzed three Prussian goals in the development of the Zollverein: first, as a political tool to eliminate Austrian influence in Germany; second, as a way to improve the economies; and third, to strengthen Germany against potential French aggression while reducing the economic independence of smaller states. The Zollverein created a larger market for German-made farm and handicraft products and promoted commercial unification under fiscally sound economic parameters. While the Union sought to limit trade and commercial barriers between and among member states, it continued to uphold the protectionist barriers against outsiders.
According to economic historian Florian Ploeckl, the commonly accepted view among economic historians is that Prussia was motivated to create Zollverein in order to achieve economies of scale in customs administration, thus leading to substantial fiscal savings.
Initial efforts at a single-toll system
During the Napoleonic Era, efforts in the Rhineland toward economic unity had mixed success. The Confederation of the Rhine, and the other satellite creations of Napoleonic France, sought to establish autarky in European trade. By 1806, as Napoleon I sought to secure his hegemony in Europe, the Continental System offered a semblance of unified effort toward a widespread domestic market for European goods. However, the main purpose of the Continental System was military, not economic. Napoleon wanted a trade embargo against Britain, through which he hoped to wreck the British economy. The combination of war and isolation from Britain's trading system destroyed markets for external raw materials and for manufactured goods, resulting in the near ruin of the Central European economy. Especially hard hit were the trading economies of the Lowlands and Rhineland states, which had relied heavily upon imports of raw materials from throughout the world, and on the export of finished products. The domestic markets in Central Europe were not large enough to sustain consumption of their own production. These problems were dramatically exacerbated by the numerous excise taxes and tolls which were the main source of state income. Reduction in trade meant the near bankruptcy of the smaller states.At the Congress of Vienna in 1814 and 1815, diplomatsprincipally those from the Great Powersconfirmed the remapping of Europe, and broadly, the rest of the world, into spheres of influence. Central Europe, or German-speaking Europe, remained largely within the influence of the Austrian Habsburgs, balanced at the periphery by the Russian empire in the east, and the French in the west. Prussia was expected to play some role in these spheres of influence, but the ambiguities of the Austrian and Prussian relationship were unresolved. The German states retained autonomy; however, the old imperial institution of the Reichstag was converted to the form of a Confederation Diet, to meet in Frankfurt. The Habsburg archdukes, now Emperors of Austria, were to serve as permanent presidents of this institution. Isolated voices, such as Joseph Görres and Freiherr vom Stein, called for the abolition of domestic tolls and the creation of a German tariff on imports. The mandate from the Vienna Congress, however, established the German Confederation, but did not deal with the economic circumstances, nor did it make any effort to achieve economic and trade standardization. Instead, the articles that established the Confederation suggested that trade and transportation questions be discussed at a later date.
Problems with unifying the customs and toll agreements
Prussia and the central and southwestern states of Hesse-Kassel and Hesse-Darmstadt, Württemberg, Baden, and Bavaria were leaders in the modernization of the toll system within the German states. In the Prussian case, the experience of the Confederation of the Rhine in removing customs barriers offered an example of how it could be done, and Hans, Count von Bülow, who until 1811 had been the Finance Minister in Westphalia, and who had accepted this position in 1813 in Prussia, modeled the Prussian customs statutes on those of the former states of the Confederation. The addition of territory to the existing Prussian state made elimination of customs barriers a powerful factor in Prussian politics. The significant differences between "old" Prussia and the newly acquired territories complicated the debate. The "newer" Prussian provinces in the Rhineland and Westphalia, with their developing manufacturing sectors, contended with the heavily agricultural territories of "old" Prussia. The dissimilarities in the two sides of Prussia confirmed regional perceptions for the need for their own political and administrative units, which became an important element of the customs debate. Within "old" Prussia itself, the customs statutes from 1818 reduced domestic customs barriers. After 1818, goods coming into Prussia and leaving Prussia were charged a high tariff. Goods moved freely within the state itself. The Prussian toll was therefore very simple and efficient. Manufactured goods were heavily taxed, especially textiles, and the most important taxes were for food, necessities and luxury goods.Similarly, in the southwest German states, it became urgent to integrate the newly acquired territories into the states' existing economic systems. The territorial growth of the southwestern middle-sized states, in particular the two Hessian principalities, but also the growth of Baden and Württemberg, had split the territorial continuity of Prussia; the Prussian state was no longer linked entirely by territory, but rather was separated from many of its newer acquisitions by territories newly acquired by other states. These states often saw their own interests as conflicting generally and specifically with Prussian expansionism, and resented Prussian dominance and authority. Furthermore, these newly expanded states, usually referred as "middle-sized states", faced problems in integrating their newly acquired territories and populations into an existing political, economic and legal structure.
These problems were exacerbated by European wide economic woes following the Napoleonic Wars. Unemployment and high prices, especially for foodstuffs, characterized an economy not yet converted back to peacetime needs. The problem in Britain was particularly severe and the British response created a ripple effect that worsened problems in the German states: In trying to manage the post-war economy, the British government was caught between the Malthusian understanding of the relationship of wages, prices, and population, and the Ricardian model. On the one hand, adherents to the Malthusian model believed it was dangerous for Britain to rely on imported corn, because lower prices would reduce wages, and landlords and farmers would lose purchasing power. On the other hand, adherents to the Ricardian model thought that Britain could use its capital and population to advantage in a system of free trade. The problems in Britain established precedent for problems in the German states; the British limitation on grain imports, through the Corn Laws, blocked economic recovery in the German states, particularly in eastern Prussia, by limiting the amount of grain that could be imported into Britain. Not only did the Corn Laws keep the price of grain in Britain high, they undermined the viability of Junker producers in east Prussia, and limited their access to external markets.
The commercial reform efforts sponsored by Bavaria in 1856 led to the General German Commercial Code in 1861 that was quickly approved by a majority of the confederation. It proved highly successful in reducing barriers and increasing trade.